"The people of Toledo don’t
appreciate natural gas, and we had better pull out of here and take it to some
city where they do. Detroit, for instance."

With gas so plentiful and cheap, some Ohioans came to think it shouldn’t have a cost at all.

These words, spoken by the
president of the Toledo Natural Gas Company, reflect his frustration at a
strange experiment: the voters of Toledo had decided to raise taxes to build
natural gas pipelines so the city could compete directly with privately owned
gas companies. Why did Toledo do this, and how did it turn out?

The story begins in 1884 when huge
natural gas reserves were discovered in northwest Ohio. Private companies
immediately began supplying inexpensive natural gas to the whole region, and
soon to Detroit as well. The gas reserves were so abundant that northwest Ohio
was awash in it, and homes and businesses enjoyed the serendipitous luxury of
cheap fuel. Ohioans began to believe that their natural gas supply was created
spontaneously underground and would last forever.

Just a few decades before,
Midwestern states like Ohio and Michigan had learned some painful lessons about
state and local governments dabbling in the affairs of private business.
Research from the Mackinac Center for Public Policy has shown that so many
government-run enterprises were expensive flops in Michigan’s early years that
voters overwhelmingly approved a constitutional change in 1851 to get government
out of the way. Ohio too had its boondoggles. But apparently those lessons were
forgotten in northwestern Ohio by the 1880s.

With gas so plentiful and cheap,
some Ohioans came to think it shouldn’t have a cost at all. As historian Chester
M. Destler observed, "Free gas was regarded as a natural right which corporate
monopoly was denying the public." In that spirit, residents of the city of
Findlay took the lead, built their own pipelines, and effectively kicked the
private companies out of town. Local leaders even supplied free gas (guaranteed
for five years) to factories that relocated to Findlay.

The townsfolk were euphoric at
their use of government to supply them with such cheap natural gas. "Why
conserve this limitless fuel?" they asked, and they wasted it recklessly for
public entertainment. Findlay burned about 1 million cubic feet of natural gas
every two days just to light 200 torches that illuminated the city day and
night. What was owned publicly was not treated with care, and factory owners and
citizens ignited gas wells intentionally to amuse themselves and impress
visitors.

The city of Toledo followed suit
and undercut local private gas companies. Many local officials supported a
referendum to raise taxes and build pipelines that would bring cheap gas to
Toledo. According to the Toledo Blade, "there are many scientists who believe
that the production is continuous, and the supply will be perennial." With good
transportation "and with natural gas as fuel, our city should become the great
manufacturing city of the West."

The private gas companies in
Toledo, meanwhile, had invested hundreds of thousands of dollars in pipelines
and they actively opposed public ownership. The natural gas won’t last forever,
they insisted, and charging a reasonable fee for it would force Ohioans to
conserve this precious fuel. But they could not overcome the campaign slogan of
"free gas," and the popular claim that the local natural gas wells would last
thousands of years. In 1889, Toledo began the process of taxing its citizens to
bring "free" gas to town.

For about five years the people and
businesses of Toledo had some of the lowest fuel bills in the nation. Then, with
the huge consumption and wasting of gas throughout northwest Ohio, the wells
began to go dry. The city of Findlay, desperate to recoup part of its
investment, had sold or leased all of its pipelines to private companies by
1899.

Shortly thereafter, Toledo did the
same thing. No one connected with the public company had either the training or
the desire to drill and search out new gas wells or other fuel options. They
wasted money like they wasted the gas. The estimated loss to the city of Toledo
was about $2 million. Meanwhile, the privately owned Northwestern Ohio Natural
Gas Company took over and supplied Toledo and northwest Ohio with gas at market
prices. In 1902, the company built pipelines into West Virginia to bring new
discoveries of natural gas into the now depleted state of Ohio. Privatization
finally prevailed.

#####

Burton Folsom is
professor of history at Hillsdale College and is an adjunct scholar for the
Mackinac Center for Public Policy, a research and educational institute
headquartered in Midland, Mich. Permission to reprint in whole or in part
is hereby granted, provided that the author and the Center are properly cited.

ISSN: 1093-2240,
SKU: V2006-22

Summary

In the 1880s, some Ohio city governments decided to provide “free” natural gas to residents and businesses. The expulsion of private gas companies led to an exorbitant waste of the gas and, eventually, taxpayers’ money.